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Using predictions to improve profitability of digital games


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Online and mobile game developers should use predictions to improve their bottom line. This whitepaper by Sonamine explains the key concepts and how to apply predictions in practice.

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Using predictions to improve profitability of digital games

  1. 1. Sonamine Predictions For GamesAn introductory whitepaper
  2. 2. Sonamine Predictions For GamesIntroductionThe rapidly growing digital games industry provides hours of interactive entertainment to hundreds ofmillions of players worldwide. Leveraging global connections via the internet and mobile capabilities,these games allow players to imagine and share in virtual worlds of fun and creativity. Notsurprisingly, the business of developing and marketing these games is extremely competitive, with new evelopinggame studios being launched every week. But business managers and marketers are not without tools to face these competitive challenges. Unlike challenges traditional offline and box games, interactive digital games that are connected and collect game play data. This game play data allows marketers to peer into the behaviors of their players. By analyzing the game play data, marketers and game designers can personalize , games to individual players, retaining players for , longer periods of time and increasing the revenue obtained per player. It is natural to assume that game developers and publishers will have to adopt the best business intelligence and prediction techniques to maintain a competitive edge.Data analysisLeveraging the game play data goes by many different terms - business intelligence, reporting, data ence,warehousing, data mining, predictions, metrics, A testing - the list goes on. This jargon soup makes A-Bit difficult to tease out what your company is currently doing and what it is not. One simple way tothink about data is to group your data analysis activites into two types: backward looking and forward :looking.Backward looking activities will tell you what has happened in the past. For example, most reportingand "analytics" will tell you how many play sessions there were, broken down by different factors suchas geography, levels and session lengths. Other types of "metrics" including virality, ARPU, ARPPU alltell you about what has already happened. By looking into time series of these metrics, you might beable to discern a trend in the past. .Forward looking activities are the prediction activities that will tell you what will happen in the future.For example, calculating every player probability of converting to paying status would be a prediction player’sactivity. You are trying to predict whether a player will behave in a particular way in the future.Another way to think about data analysis activities is to determine whether your analysis is at theaggregate level or at a player level. Aggregate data analysis helps you understand the behavior oflarge groups of players. For example, you may segment your players into the classic Bartle playercategories. Metrics such as ARPU and virality are usually calculated at the aggregate level. Sonamine LLC | Confidential 1
  3. 3. Sonamine Predictions For GamesPlayer level data analysis lets you uncover insights for each player, so that you may perform 1 ts 1-to-1marketing to these players. Unique virtual goods recommendations and churn prediction would beexamples of such player level analysis.This paper discusses forward looking predictions that are generated for each player. predictionsHow predictions increase the bottom lineThe evolving game industry can learn from more mature consumer industries that are leveragingpredictions in their business operations. For example, an online retailer has found that shoppers whoclick on recommended products based on predictions have a 28% larger order sizei. Industry leader derives 20-30% of its revenue from the product recommendations ii. To the games 30%industry, adding prediction based recommendati recommendations could increase micro-transaction virtual goods transactionrevenues by 30%.Beyond revenue, marketers know that it is arketerscheaper to retain a customer than it is toacquire a new paying customer. Many consumerindustries use advanced churn predictiontechniques to identify and retain customers thatare about to defect or churn. For example, atelecommunications company in the US was ableto reduce monthly churn by 30% using a ycombination of churn prediction and retentioncampaignsiii. By using the same churn predictionand retention techniques, game developers canprevent the loss of revenue when players cancelsubscriptions or stop returning to the game.The key to using these predictions is to ensure that they are actionable. A prediction such as " y "overallARPU will decline" is not actionable because it does not describe how a marketer can prevent the llprediction from occurring. A prediction such as "these five subscribers have a 90% probability ofabandoning the game" is actionable, because marketers can retain these five subscribers usingpromotions.In the next few sections we shall discuss specific ways that predictions can be used in games.Predicting conversion to paying status versionThe different dynamics and mechanics within games provide rich information that can used todetermine player satisfaction and engagement. But it takes more than an engaging game to induceplayers to open their wallets. Other factors such as the relative affluence of the player, her credit- factors creditworthiness and age all affect the player’s ability to pay for games. Finally, social group behavior andpeer pressure are important factors influencing a player’s decision to purchase virtual go goods or 2 Sonamine LLC | Confidential |
  4. 4. Sonamine Predictions For Gamessubscriptions. By analyzing each player’s unique game play behavior, demographics and socialinteractions, the likelihood that each player will convert to paying status can be accurately predicted.Marketers have several ways to utilize such conversion predictions. Marketers may decide to sendreminder emails or display more “conversion related” messages to the players who are extremely likelyto convert. These emails may not contain incentives. However, for players who are only moderatelylikely to convert, marketers may offer aggressive promotions. This dual-pronged approach ensures thatyou are accelerating the conversion process without unnecessarily giving offers to every player. Thenet result of would be to greater conversion rates and accelerated monetization of players whilemaximizing revenue.Player retention through churn predictionSince the cost of acquiring a new player is high, it makes sense to start retaining your existing players.Retaining existing players is important for all games regardless of the business model. For advertisingfunded games, returning players provide “inventory” which can then be sold to advertisers. Gamesfunded by subscriptions would certainly want to retain the active subscribers. Free to play gamesfunded by virtual-goods micro-transactions would want to engage players until they are “ready” toconvert.One common technique is to email players who have already abandoned the game and try to “re-engage” them. However, these re-engagement efforts are usually not very successful because theplayer has already left the game.A more fruitful approach is to pinpoint players who are still active engaged, but who may be likely toabandon the game or subscription in the next few weeks. The key difference here is that these playersare still currently engaged in the game and have not abandoned the game YET. It is possible formarketers to reach these players with promotional offers and targeted messages.Acquisition through player-get-player campaignsRecent studies have shown that a customer’s decision to adopt a new mobile application is highlyaffected by the social groupiv. For each social group, when there are more members who use anapplication, other group members are more likely to adopt the same application. Using this social peerpressure phenomenon, it is possible to predict which players will be successful at inviting their friendsto the game. This social or peer pressure effect can be used by games marketers to improve theirplayer acquisition campaigns. These “viral” player acquisitions are essentially free of charge, and thusreduce the customer acquisition cost for the game.Tactically, a games marketer can provide extra incentives to players who score highly on these viralpredictions. These incentives can be displayed within the game or using email promotions. A moretargeted list of players ensures that these viral promotions are not shown to every player, thus avoidinga potentially unpleasant user experience for all players. Sonamine LLC | Confidential 3
  5. 5. Sonamine Predictions For GamesPlayers likely to purchase new contentConsumer industries have increasingly implemented comprehensive customer marketing programs.These programs aim to deepen the customer relationships by offering more relevant products tospecific customer segments. Running monthly sales and promotions campaigns are standard tactics inthese programs. Game developers are beginning to adopt these techniques by having special contentsales for Christmas, Valentines, Easter and other holidays. Other monthly content promotions can alsobe executed with current content to drive revenue.To maximize revenue while minimizing the perception of annoyance, marketers like to target thesepromotions to players who are most likely to respond to the promotion. Predictions can be used todetermine these target lists. By using previous purchase and game play behavior, a purchasepropensity model can be developed. This model will calculate for each player her likelihood topurchase the specific content. Marketers can then target the promotion to players in the top 10% ofscores. The response rate is higher for this 10% group; marketers can send other relevant promotionsto the remaining 90% of players.Virtual goods or content recommendationsMost games allow players to personalize their experiences. These personalization options range fromavatar appearances to city buildings and fixtures. Players get to choose from a large catalog ofcontent that they can purchase or use. These catalogs are presented as a “shop” or “build” section ofgames. Unfortunately, players have to choose from a bewildering array of options, which increase innumber as players progress toward higher levels.One way to improve the player experience is to recommend the most relevant and appropriate contentfor each player when she opens the catalog. The content relevance can be predicted using previouscontent purchases and each player’s social group purchases. Another way to leverage contentrecommendations is to send a weekly content discovery newsletter to all players. This contentdiscovery newsletter would include five of the most relevant content to each player. An easier andmore relevant discovery process will encourage players to purchase more content.Sonamine predictionsSonamine helps game marketers identify key players and content using prediction techniques. Byengaging with Sonamine, game marketers can reduce churn and increase monetization rates.To streamline the process, Sonamine offers five types of standard predictions:Churn prediction For key player groups such as subscribers or high value players, Sonamine willcalculate for each player her probability of canceling the subscription or abandoning the gamealtogether. Sonamine uses diffusion, community detection and influencer identification algorithms topinpoint these “contagious churners”. Game marketers can target retention campaigns using email or 4 Sonamine LLC | Confidential |
  6. 6. Sonamine Predictions For Gamesin-game promotions to high churn probability players. Game designers can also customize the game toencourage high churn probability players to return to the game.Conversion prediction For games that are free-to-play, Sonamine will calculate for each player herprobability of converting to a paying player. By targeting the players most likely to convert, gamemarketers can target email promotions or in-game promotions, thereby accelerating player conversionand increasing revenue.Virality prediction For games that have a social component, Sonamine will calculate for each playerher probability of successfully inviting friends to join the game. Game marketers can provideincentives to these highly influential players to encourage invitations. Successful invitations lower thecost of customer acquisition.Cross-sell prediction For a specific game or virtual good, Sonamine will identify the players mostlikely to purchase the game or virtual good. Game marketers can target email promotions or in-gamepromotions to these players most likely to purchase.Next-best virtual good recommendation Sonamine will identify the next best recommendations foreach player. Game marketers can target email promotions or in-game promotions with thesecustomized product offers.Beyond these five standard predictions, Sonamine also provide custom prediction services.How Sonamine predictions are generatedTaking a page from the consumer industries using predictions, Sonamine analyzes data using advancedmachine learning algorithms to generate their player predictions. Predicting behaviors such as churnand conversion is a “classification” problem in machine learning terminology. Sonamine uses variousclassification algorithms that are proven to be scalable and robust in handling the different types ofdata found in game play. These classification algorithms include neural networks and random forests.Next best recommendations are “associative” in nature and Sonamine uses a combination ofcollaborative filtering algorithms augmented with our patent-pending network analysis system.Four types of data are used in the predictions. Demographic information about the player that isprovided by the game developer can be included in the analysis. These data elements include age,gender, location and any other related information.Behavioral information about the game play can be indicative of future behaviors. Sonamine’sextensive experience in telecommunications and financial services predictions has been transplanted togenerate game behavioral data elements that are useful in predictions.Sonamine has a patent-pending system that leverages the network of social interactions among playersto generate predictions. These social interactions might be occurring either within or outside thegame. Sonamine LLC | Confidential 5
  7. 7. Sonamine Predictions For GamesFinally, Sonamine integrates third party data where possible to extend the accuracy of the Sonaminepredictions. Such third party might include census and credit data.Data transfer and prediction APIsGame developers can transfer the required game play data to Sonamine via real time APIs or a batchupload process. The Sonamine system combines the data with third party data, and refreshes theplayer predictions.To act on the predictions generated by Sonamine, a game developer can access the predictions in realtime via a prediction API. Game play Sonamine Sonamine Game Server API front Prediction or Client Predictions end Servers Third Party DataProof of concept and evaluationSonamine offers a proof-of-concept (POC) package that includes data transfer and predictions for nocost. These POCs can be completed within 10 days after receiving your data. Please contact us atinfo@sonamine.comi Sinan Aral, Lev Muchnik and Arun Sundararajan. Distinguishing influence-based contagion fromhomophily-driven diffusion in dynamic networks. Proceedings of National Academy of Science, Dec 22,2009 vol 106 no 51 p. 21544-21549. 6 Sonamine LLC | Confidential |